Black Monday Survivor: EVERYBODY LIES, And Momentum Is The Only Truth Left!

0:00Here's a trader with four decades of

0:01market experience, two best-selling

0:03trading books, and a confession. Because

0:05the games you think the market plays on

0:07you, he used to run them himself. Most

0:09people walk into the market, they think

0:10it's a 50/50 game. It's not. It's a 7525

0:13against. And the reason why is because

0:16everybody lies. The whole point of the

0:18market is to make you, oh, you're

0:20looking at this, there's a breakout, you

0:21buy the top, it falls down on you. Guys

0:22on the floor used to do that all the

0:24time. Run the stock up and then drop it

0:25like a stone. It's never about the

0:27fundamental driver of the thing. It's

0:30always about can I trick somebody else

0:31into making the wrong mistake so I can

0:33take their money away from them.

0:34>> Introducing Boris Schlloberg, a trading

0:36veteran who began his career at one of

0:39Wall Street's most notorious firms. He

0:41survived the biggest single market crash

0:43in US history on Black Monday and he

0:45built one of the most respected forex

0:47research platforms in the world of

0:49finance. I trade with ICT order blocks.

0:51I found it to be incredibly valuable.

0:53The last thing in the world I thought

0:54that I would actually like was ICT. It

0:56definitely orients you on the right side

0:58of the trade in that particular time

0:59frame.

0:59>> We've all seen it play out. We've all

1:01seen a million get blown. How do you

1:02qualify concepts, [music] confluences,

1:04theories, and ideas to trade models and

1:07plays.

1:07>> First of all, you have to understand

1:08that

1:10it's not that you have to reinvent the

1:12wheel, you just have to modify the

1:13wheel. We know statistically, this is

1:15not even anything controversial, the

1:17only thing that has completely not been

1:20whittleled away in efficient market

1:21theory is momentum. But how you trade

1:23momentum, when you trade momentum, what

1:25are the components that really create

1:27momentum in this particular strategy?

1:28What instruments are really responsive

1:30to momentum and which ones are not

1:32responsive to momentum? You don't have

1:33to reinvent. You simply ask yourself,

1:34where is it failing? Why is it failing?

1:36If it's failing like this, is it an

1:38opportunity for me? In this episode,

1:39Boris reveals why there's only two types

1:41of trades to be taking in the markets.

1:43the specific one hour in the day that he

1:45calls the graveyard for scalpers and the

1:47boring strategy and approach he would

1:49give to any trader looking to make a

1:51consistent $150 per day. When people

1:53come into trading, we all start off at

1:55the same kind of places, baby pips,

1:57trading 101. And we all learn core

1:58principles like top down analysis, trend

2:00line, support, resistance, XY Z. And one

2:02of the biggest things that people say is

2:04M1 is noise. Lower time frame is noise.

2:06Stick to the higher time frames because

2:07there's more money, there's more weight,

2:09XY Z. But then you're in and out of a

2:10trade in 5 minutes and you're trading

2:12the M1. So, how do you find clarity when

2:14most people see noise? If you look at a

2:16chart,

2:18what I want to talk about before we move

2:19on is uh Black Monday. So, it was I

2:22believe a 20% crash in a single day.

2:24>> Yeah, 22% crash.

2:25>> 22%.

2:27What lesson first of all, what was it

2:29like? What was it on the scene?

2:30>> Honestly, it really was the most surreal

2:32experience in the world because it sort

2:34of you don't understand that it wasn't

2:35like a situation where you walked in and

2:38everything, you know, instantaneously

2:40fell. It was kind of like there was a

2:43terrible terrible Friday. It was the

2:44worst. I think Dow dropped 100 points on

2:46Friday was the worst drop at that time.

2:48It's very quaint, you know, to think 100

2:50point drop was was bad. But it was it

2:52was the worst Friday. We all went in and

2:54then everybody came in Monday thinking,

2:55oh, it's going to, you know, it's going

2:56to rally because when it's had such a

2:57huge decline, it was going to and it did

2:58a little bit of rally and then it just

3:00started to really really really kind of

3:02slowly die off. But here's the

3:04interesting part. What people don't

3:06understand is that during that day we

3:09also had the single greatest rally um

3:13that nobody even remembers because at

3:15around 11:00 we hit the bottom and then

3:18we rallied a full 10% which is very

3:21natural markets always if you look at

3:23markets on a day-to-day basis you know

3:24you kind of bottom out around 10:30 11

3:26o'clock and you try to rally into the

3:28afternoon and we rallied into the

3:29afternoon around to about 2 o'clock and

3:32then things just went absolutely crazy

3:35and I think I I don't know what happened

3:38because it to this day you really can't

3:40figure out exactly why the selling

3:42resumed with such ferocity but it

3:44resumed with such ferocity that markets

3:46were crossed. What that means is you

3:49were looking at Coca-Cola, you were

3:50looking at Honeywell, you were looking

3:51at IBM, there's, you know, those those

3:53names from, you know, the big names from

3:55from the olden times and the uh the

4:00offer was lower than the bid. Like in

4:02other words, they were offering it

4:04underneath the bid just to get rid of

4:05the uh just to get rid of the product.

4:07You know, I think I I can't remember how

4:09many um specialists, which were the

4:12market makers on the New York Stock

4:13Exchange, went bankrupt at that point

4:15because their whole job was to basically

4:16keep buying as as the public was

4:18selling. It just simply ran out of

4:19money. They ran out of money and

4:20>> it becomes a death spiral.

4:21>> It became a death spiral and it wasn't,

4:23you know, it wasn't a situation where

4:24like everything just bounced back the

4:26next day. The big story of course as

4:28everybody knows is that there was this

4:29guy in Chicago. I forgot his name. Um he

4:32sold his firm actually to Goldman Sachs

4:34who basically was came on the floor in

4:37Chicago. There was this IMM contract

4:39which was like an incredibly incredibly

4:41uh volatile futures contract because it

4:43was made up of a small amount of Dow

4:45stocks and he started buying it on

4:47Tuesday and that was the only thing that

4:49rescued the market. The market was

4:51literally like you know a ste from just

4:54getting completely destroyed. we could

4:56have had a 1929 type of a situation. Uh

4:59so we came much closer than you know

5:01than most people realize to to to a

5:03really really serious

5:04>> it's a single savior single point of

5:06savior.

5:06>> Yeah.

5:07>> And uh I mean did that time is that a

5:11distant memory that you tried to put in

5:13a part of your mind you don't want to

5:14think about or is it something you

5:15learned a lot from?

5:16>> No, you know it's like like being in

5:17war. I mean not that I've ever been in

5:19war but like it was such a you know I

5:21think when you're in a battle it's

5:23everything moves in slow. All I remember

5:24is that everything about that day in

5:26slow motion for some reason. Every time

5:28I think back to it, you know, it it's it

5:30moved at at a speed of light, but

5:33everything I remembered it was like

5:34being in a slow motion. And I think it

5:36was just shocking. People just you've

5:38never I you know, to this day, you've

5:40never had that kind of a decline. And

5:41and it wasn't the thing was there was

5:44nothing going on. There was no war.

5:47There was no oil crash. There was no

5:50assassination. There literally was

5:53nothing fundamental, which is kind of

5:55fascinating when you think about it,

5:57that created this whole thing. It was

5:58what's known as cascade. People started

6:00selling. They they basically blamed it

6:02on what's called portfolio insurance

6:03where people were selling futures to

6:07hedge their loss because futures were

6:08much more uh easier. They required much

6:11less capital and you could sell them

6:12short without having to uh look for an

6:14uptick. So when stock market when cash

6:17the stock market in New York started

6:18falling, they started selling in

6:20Chicago. And at that time, of course,

6:21remember the markets were no nowhere

6:23nearly as efficient. They weren't they

6:24didn't have nearly as deep a cap. Right

6:25now, you couldn't do this because the

6:26guys would just step up and they bring

6:28the market right back up. I mean, that's

6:29actually the beauty of the markets right

6:30now in some ways is that the markets

6:32really are much more efficient and they

6:33don't allow these kind of ma massive

6:35displacements. But it was just like a it

6:36was basically an earthquake. It was just

6:38a just an earthquake out of nowhere. And

6:40people all I remember is that at the end

6:42of the day, people were just shell

6:43shocked. It was

6:44>> What was your main emotion? Was it fear?

6:46>> No, I was I was too young, too fear. I I

6:50I had no idea what you know that this

6:53could have been the precipice of like a

6:55massive you know depression. I was just

6:57like oh my god that was insane. Like I

7:00mean I was like I just remember the last

7:01hour watching my quotron just days as as

7:05Coke was trading under its bit just like

7:07they were just you know and and remember

7:10these stocks were trading you know in

7:11normal days they'd be trading you know a

7:13quarter wide maybe an eighth wide

7:14because this is before decimalization

7:16and they were trading $4 wide meaning

7:18that you know there was just $4

7:19discrepancy between bit and ask and

7:20there still this what it taught me by

7:23the way is that first of all there is no

7:25such thing as support there's no such

7:27thing as resistance but there's

7:28definitely no such thing to support

7:29meaning that that if people feel um like

7:33their life is ending, they'll sell you

7:35something for a penny that's worth a

7:37million. you know they they will just be

7:39the panic will take over and um this

7:43kind of a crowd complex will absolutely

7:46drive you down which is this is the

7:48thing you need to remember is that it if

7:50you keep buying a falling asset thinking

7:54it's it's got it's value it's got to

7:56bounce it's got to bounce it will only

7:58bounce after you've lost all your money

8:00it doesn't doesn't matter how long how

8:02low you think it can go ridiculously low

8:05it can go it will go lower if there's

8:07panic in the market. I think that was

8:09and so basically I think it taught me

8:10early kind of a healthy respect for um

8:15for stops for for getting out of the

8:17market that that there is no such thing

8:19there's no such thing as value. There's

8:21only there's [clears throat] only the

8:23moment and if that moment uh somebody

8:26feels like they just want to get out at

8:27any cost necessary you will get

8:30destroyed.

8:31>> My question was actually going to be

8:32exactly that. I guess I taught you

8:35mostly about risk and risk management

8:36and capital preservation at a at a such

8:38a bleak time.

8:40>> What what what frameworks or ideas have

8:42you built upon I guess inspired by not

8:44just your career but that time also

8:45around risk management. So, it's

8:47interesting, you know, and I think it's

8:48probably I I know now that I think about

8:49it, you know, you're always formulated

8:51by whatever summary experience in your

8:53youth, right? Like I think if I was

8:55walked into the middle of a bull market

8:57and it just kept on going up, I'd

8:58probably be the type of person that just

9:00bought and bought and bought and levered

9:03up my buys and instead I became the

9:05person that like sold my sold my profits

9:07right away. Like I am always the person

9:10that, you know, I always say I'm never

9:12going to be the person that makes a

9:14million dollars in a in a trade, but I'm

9:16also never going to be the person that

9:17lose a million dollars in a trade

9:19because I am, you know, I I eat like a

9:21like like a pigeon. Just take it out,

9:23take it out, take it out, take it out.

9:24There was a study on exactly this and it

9:26was about the financial formative years

9:28that everyone has and whether it's a

9:30personal traumatic experience or a

9:31euphoria or or your parents

9:33>> and if your parents were you know in a

9:35in a bull market and that was your

9:36financial formative years you are more

9:38optimistic versus in a recession

9:39pessimistic. So absolutely I think

9:41exactly that

9:42>> but I think it works even on a much more

9:43granular level as to what kind of a

9:45trader you are. There are traders who

9:46will add to their winners and ride their

9:49winners and do all kind of stuff. And

9:50there are traders like me who are just

9:52like taking profits right away, right

9:53away, right away, just scaling out,

9:54scaling out. Like the mo, you know, the

9:56moment I'm in a trade, I'm looking to

9:57get out of it. The moment I'm in trade,

9:58I'm looking to get out of it because I'm

9:59always uh I'm always afraid for that

10:01shrapnel. I'm always afraid for for the

10:02blow up. You know, I'm always looking at

10:04the blow up, not the um not the the rev

10:07up. Um which is it's not a it's not a

10:10great thing. I'm just it just simply,

10:11you know, it's a reality of who I am.

10:13Yeah, yours is probably a more

10:14exaggerated situation. But in general, I

10:16think everyone has that version of it.

10:18Even if it's you lost $500, it can feel

10:20as extreme relatively speaking. But

10:23yeah, when we talk about trading

10:24psychology, there's all the big emotions

10:26uh you know, fear, greed, desperation,

10:28anger, XY Z.

10:29>> Uh but everyone has a different mix of

10:31each. Some people are have a temperament

10:33basically uh to be more fearful or

10:35greedy. Some people are a bit more

10:36aggressive and volatile. Um therefore as

10:39you've identified a certain trait in

10:41yourself that you've noticed could be

10:42tied back to that time. Nonetheless when

10:44you notice a temperament around your

10:46psychology in the markets what is the

10:49step after? Should we lean into it and

10:51understand this is my bottleneck

10:53therefore uh build my risk management

10:56and partial taker systems around it or

10:58is it about your systems? For example,

11:00just to give you context, I know I'm not

11:02the best at being patient. For example,

11:04if I'm in a trade and I have to be

11:06waiting for two weeks before a swing

11:07trade plays out, I'll make a decision on

11:09a Tuesday. I can't stop myself, let's

11:10say. So therefore, I realize I catered

11:12my strategy to my psychology, being I'm

11:14better on the lower time frames, as are

11:16you, it seems. And I prefer to day

11:18trade. So I catered my technicals to my

11:20psychology. Or you could cater your

11:21trade management to your psychology.

11:23Which arena are you?

11:25>> Oh, no. You I absolutely believe you

11:27trade to your personality.

11:29>> Oh, nice.

11:29>> You trade to your personality. I have a

11:31strategy that many guys in my room make

11:3610 times, sometimes 15 times the amount

11:39of money that I make with it. It's not

11:42the strategy. It's not the strategy at

11:44all. It's the personality. You know,

11:46it's absolutely the personality. What

11:48you need to do is you need to cater. You

11:51need to whatever strategy you have, you

11:54have to be comfortable with your

11:56personality to execute it. So my

11:58strategy, you know, may have an exit at

12:00like one minute and an exit in three

12:02hours. Uh, and in terms in terms of, you

12:05know, like I'm always catching trends

12:07very early and I'm always out of trends

12:08incredibly incredibly fast. And the guys

12:10who have the patience and have the

12:12personality structure to even add to

12:14their positions are literally making 10

12:1615 times and it's great and I am super

12:19happy for them. The thing that I think

12:20where people make a huge mistake is they

12:22feel resentful. Oh, why can't I do that?

12:25because you're not that what you can do

12:28is make consistent money, you know, all

12:31the time. And those people sometimes

12:32can't because, you know, they're al

12:34they're also going to get trapped.

12:35They're going to get trapped sometimes

12:36because the markets will turn on them

12:38and then, you know, they're they're

12:38large at the top and they and they may

12:40going to they may hold on to a position

12:42as it turns negative on them and then

12:43like boom boom boom all of a sudden, you

12:45know, it turn it can be just as vicious.

12:47So don't ever force yourself to be

12:50something you're not. That's the number

12:51one rule of trading. Actually, the

12:53number one rule of trading has nothing

12:54to do with strategy. It's forcing

12:56yourself to become something you're

12:57uncomfortable doing.

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14:05Titans of Tomorrow audience. With that

14:07being said, let's get back into today's

14:08episode. Interesting because we we

14:11arrived to the same conclusion at this

14:12point, but then the thought for me is

14:13also uh should that define me? is is a

14:18past trauma something that I should hold

14:20with me and lean into and and optimize

14:22everything around it or I should address

14:24it and then now I'm uh I'm I'm

14:27harnessing it let's say uh would the

14:30approach be acknowledge and understand

14:31what it is address and fix and then now

14:34uh apply a different approach or just

14:36cater to your own personality

14:37>> I don't know I have found at least you

14:39know for me maybe other people have I

14:41have found that the market is a terrible

14:43place to work out your psychological

14:46problems. It is not a place that is very

14:49uh forgiving. It's actually the most

14:51unforgiving place in the world. And if

14:54you sort of lean into trying to

14:55experiment of becoming a better man or a

14:58better woman, um it will just destroy

15:00you. Uh I think at least in my in my

15:02experience that that's been that's been

15:04that there are people who actually do

15:06they can they can reformulate

15:07themselves, you know, um into a more of

15:10a longer term trader. And I know there

15:12are guys I know who like they were

15:13scalpers and like now now I'm trading

15:14you know I'm trading two two week uh

15:16charts. I'm like really? Yeah that's

15:18great. You know there it all again it

15:20all depends on what kind of a you know

15:22personality you have. I'm a person I

15:25like to have incredibly quick

15:27>> um results. You know when I'm talking

15:30you were saying you know you have to you

15:32you couldn't hold it for two weeks. I

15:34don't hold I for me 10 minutes is is a

15:36lifetime. you know, we're usually in and

15:37out of a trade within first five

15:39minutes. And, you know, I'm going to be

15:40making quite a lot of those trades

15:41throughout the day. But the flip side of

15:43that is I couldn't care less about any

15:45given trade. I couldn't care less about

15:46any given two trades or three trades or

15:48four trades because I know I have 20

15:50trades in front of me um as the day

15:52develops. And, you know, and I'm just

15:53looking at the next five minutes to try

15:55to figure out, you know, what I should

15:56be doing. Interestingly enough, most

15:58traders put the north star in their

16:00whole journey, which is my edge, my

16:02data, my back testing, my system, and

16:04I've just got to cater everything around

16:06that. Uh, and it's like, oh, well, I

16:08feel like taking yolo trade, but I know

16:09the last four times I did that, I got

16:11burnt. So, I look back at my data or I

16:13feel like I want to enter upon this, uh,

16:15criteria, but I've tested it. That's not

16:17a profitable criteria, so I'm not going

16:18to take it. These things sound good on

16:20paper, but it seems like for you, it's

16:22temperament.

16:22>> But here's here's what happens in the

16:24reality. First of all, all of your data

16:26goes out the window the moment the

16:27market trades because what's the market

16:28trying to do? Like you say, like let's

16:30take that example of like, oh, I, you

16:32know, I've tested this and it doesn't

16:34work. And now you're looking at the

16:36market and it totally works. And you're

16:37like, oh my god, I could have made

16:39$10,000. I can't believe I'm stupid

16:41enough to have listened to my own data.

16:42That's exactly what the the market will

16:44always do the thing that is least

16:48predictable and most exploitative of

16:51your personality. You know it will. This

16:53is why I always laugh. I always know

16:55people have never really traded in their

16:57life. If they tell you, well, just

16:58follow your plan and you know, write out

17:00your thing and write out a, you know,

17:01journal and do all that stuff. I mean,

17:02if it was that easy, everybody everybody

17:05would win. The whole market's whole game

17:08is to make you lose. You know, the the

17:11somebody said Tom Sausnoff who started

17:15Tasty Trade and actually thinkers, great

17:17guy. um and he was a a market maker on

17:20on Chicago Board of Options Exchange. He

17:22had this great great point. He said that

17:24most people walk into the market, they

17:25think it's a 5050 game. It's not. It's a

17:297525 against. And the reason why is

17:32because everybody lies. The whole point

17:36of the market is to make you, oh, you're

17:38looking at this, there's a breakout. Oh,

17:39I got to buy the breakout. I got to

17:40break it. Boom. All of a sudden the, you

17:42know, you buy the top, it falls down on

17:44you. Oh, you know, um, you know, look at

17:47this. you know, they're building a

17:49bottom. I'm going to I'm going to

17:49definitely come in on the bottom. Boom.

17:51Uh they drop they drop the floor on you.

17:53The whole point of the market is because

17:55they, you know, everybody's trading

17:57against everybody else. And there's a

17:58huge element of spoofing of of lying.

18:01Now, I was fortunate enough to kind of

18:03like, as I said, come up in the 80s and

18:0490s when I had a chance to speak to a

18:06lot of guys who were still on the floor.

18:08And remember that guys on the floor used

18:09to do that all the time. They would they

18:11would create demand and then drop the

18:13demand. And you know and I used to and I

18:15worked for a market maker as well where

18:16you know you would you would run run the

18:18stock up and then drop it like a stone.

18:20That's why by the way you see those type

18:22of behaviors in stock index futures all

18:24the time. You know you'd run it like

18:25from 9 to 10:30 and then all of a sudden

18:2710:30 boom you know they drop it they

18:29drop it like a stone um on this thing.

18:31It doesn't always happen. There's

18:32there's other factors. There are other

18:34players that come into the game. But

18:36everybody it's not it's never about the

18:39fundamental driver of the thing. It's

18:42always about how can I trick somebody

18:44else into making the wrong mistake so I

18:45can take their money away from them.

18:46>> It almost become I mean the market is

18:48zero sum. It's it's just flowing between

18:50money are not necessarily created or

18:51destroyed. So when you realize it's a

18:53competitive environment obviously it's

18:56not about just who has the better edge.

18:58It's whoever cheats as well that that

19:00could part of it probably more back in

19:01the 80s

19:02>> and I would say like in a u in a

19:04perfectly open way you know like honor

19:06between thieves if you if you if you

19:08come in with your eyes wide open

19:09understanding that everybody's going to

19:10be lying to you and that you know the

19:12best looking breakout is not necessarily

19:14the you know the perfect breakout.

19:15That's why I always laugh. I mean I look

19:17at I look at a lot of technical traders

19:18and I go oh you know this what I IVG is

19:22that what it's called you know the ICD

19:23goes you know I can't believe that

19:25failed. I'm like, "Dude, of course it's

19:27going to fail." The moment they know

19:28that they think they they they think you

19:30think this is a pattern, they're they're

19:31gonna make sure that they're gonna wipe

19:32the floor with you on that particular

19:34pattern.

19:35>> Okay, I got a million questions right

19:36now. So, number one, technicals.

19:38>> Yeah, I

19:39>> I like what you're describing here

19:40because it's like it's zero sum, but

19:42it's also kind of game theory where it's

19:45I'm going to buy here because I think

19:46everyone is buying here. A support

19:48level. Does the support level work

19:50because of some inherent reason? No. It

19:51probably works because a lot of people

19:53agree upon it. A lot of people act upon

19:54it and then it becomes it becomes

19:56respected but then it becomes an

19:58opportunity to heavily exploit too. So

20:01then your counterpart is sitting there.

20:02>> So so what what is the truth of

20:04technicals here then?

20:05>> The truth of technicals is that you got

20:07to look at it from both ends. It's like

20:11um that old Kenny Rogers song of you got

20:13to know when to hold them, you got to

20:14know when to fold them. It's an old

20:15country song like from an old time

20:17meaning that sometimes your buy signal

20:20is a buy signal and sometimes your buy

20:23signal is actually the best sell signal

20:24there is. Now that's a very very hard

20:28concept to get around because people

20:29like to have very definitive ideas of

20:31you know of how things work. But

20:33actually no, you know, your strategy is

20:36actually the perfect reversal strategy

20:38in certain times of the market and in

20:40other times of the market it's actually

20:41an incredibly incredibly val and you you

20:43sort of the more you trade kind of

20:44realize, oh my god, you know, had I just

20:46done the opposite, I would this would

20:47this would been such a great sell

20:48signal. But that nuance really only

20:51comes with just tons and tons and tons

20:54of screen time. you you have to watch

20:56the market for hours and days and weeks

20:58and months on end to kind of understand

21:01when things are really correct you know

21:04when you really you know when things are

21:06moving um properly or when your signals

21:08are just the exact opposite. So let me

21:10propose a thought which is how do how do

21:13we differentiate signal from noise and

21:14I've seen people run simulations online

21:16of for example like a head and shoulder

21:17pattern and they just run it objectively

21:19left whatever the head and shoulder

21:21pattern and then they realize that okay

21:23there is a lot of times it works and

21:25that's why people believe it because it

21:26it works sometimes just like a broken

21:28clock is correct sometimes but when you

21:30run it along a long simulation often

21:33these things come out as noise. So then

21:35the solution usually becomes let me add

21:37more criteria and filters and now you

21:39end up either overfitting and then

21:41you're never taking a trade or you're

21:43mix and matching spaghetti on a wall

21:44different confluences every time but

21:47what I found in my experience and

21:48correct me if if I'm on the wrong path

21:50here but I found you can find a lot of

21:52ways to get in there's always a way to

21:54get in in my opinion therefore the

21:56strength becomes in the reasons you

21:58didn't get in your invalidations become

22:00almost more important than your criteria

22:01to get in what's your thoughts here

22:04>> yeah I I agree in principle. I mean, you

22:06know, honestly, when you were test

22:08there, when you were saying you test all

22:09these patterns, it's not that they're

22:11noise. They basically come up to about

22:1250/50 that the, you know, if you ever

22:14ran every long-term strategy, eventually

22:16it kind of, you know, concentrates on a

22:1850/50 bet, right? Yeah. They work 50% of

22:20the time. They, you know, so it's just

22:22even money. So, there's like there is no

22:24actual edge. The edge, as you said, is

22:26in kind of interpretation. The thing

22:28that I started doing is, you know, I

22:31have really really gotten into AI as as

22:34you know, as we started talking about

22:35this and I actually use AI now as an

22:38incredibly helpful tool. I'll give you

22:40an example of of what we do. So, um,

22:43because we trade on a one minute chart,

22:46right? And I have a certain strategy

22:48that runs, you know, throughout the day,

22:4924 hours a day. I've gone back and I've

22:52had AI test my strategy on the full

22:5524-hour cycle in NASDAQ and gold, right?

22:59And what you will find is that it

23:01actually works 70% of the time. Like let

23:03in it's, you know, 70% of the time is

23:05sort of my my perfect, you know, that at

23:07that point I have like a 5 10% edge in

23:09my strategy. So that gives me really

23:11strong confidence it's going to work. He

23:13worked like you know 7% of the time and

23:15during certain hours and not like you

23:18know just once or twice but like every

23:20single day of the week for like five six

23:22seven weeks in a row like London open

23:24works really really well for continuity

23:26strategies right and then it doesn't

23:28work the other times. So what we've done

23:30is we've actually taken that information

23:33added it into our indicator and have now

23:36know like okay this is 11 o'clock in the

23:39morning gold is this strategy is either

23:42green or uh red on gold meaning like you

23:44know it work it's basically cont there's

23:46only really honestly two trades in the

23:48market continuity what are you doing

23:50when you're trading you're betting

23:51you're betting two things you're betting

23:53on continuity meaning that the market is

23:55you buying high or it's going to go

23:56higher or you buying because you think

23:57it's going to go further up or you are

24:00selling because you think it's the top

24:01and it's mean reversion. So that's

24:03discontinuity, right? There's that

24:05literally the there's only two trades in

24:07the market. The only difference is

24:09amplitude. Like you know, if you're a

24:11long long-term trader, you're just

24:12betting on a much larger move up. If

24:15you're a short-term trader, you you

24:16know, if [clears throat] you're a

24:17scalper like I am, you're looking for

24:18five points back. I still remember, it's

24:20funny, going back to the 80s or like the

24:2290s when when uh the.com uh era

24:24happened, there was a company called

24:26Inc. to me. Uh it was a very very hot

24:28search stock. The stock went up $25 in

24:31one day. I never once was on the long

24:34side. I was always selling it short. I

24:37never had a losing trade because I was

24:39sell I was just basically trading the

24:42the very very small discontinuity,

24:44right? It was it was lucky, you know, it

24:46was it wasn't you know I'm I'm not you

24:47know it's not like I had some some

24:48genius but the point was like you can

24:50make money either way depending on on

24:52what you're doing, right? So what we do

24:54is we say oh this is a discontinuity

24:57hour meaning most of the breakouts are

24:59going to fail. So if they're going to

25:01fail that there's not going to be you

25:02know when you're buying it's not going

25:04to go further up it's actually probably

25:05going to likely going to go down then we

25:07look to take our strategy and invert it

25:11completely different like like in other

25:12words instead of looking for buy

25:14breakouts I'm looking for buy failures

25:16on the same strategy. So we've taken the

25:19same strategy and given it two lives.

25:22One life is its original meaning and the

25:25other life is like you know second

25:26universe you know opposite universe

25:28where we look for the exact opposite

25:31signals. Now there's you know different

25:32rules for each thing and you kind of you

25:34you still have to have rationality and

25:37intelligence and you know market

25:38structure. It's not like, you know, just

25:39gambling away, but having that

25:42>> input like it's so incredibly cool now

25:44that AI can just tell you, yeah, this is

25:46a dumbass hour to trade. You shouldn't

25:48be trading this. You know, you and you

25:50know this because the thing is we all

25:52know this subconsciously. We all know,

25:54oh, why am I trading like at 9:00 9:00

25:56in the morning, by the way, um there's a

25:58guy on on on Twitter who I absolutely

26:00love called Odd Stats, and he just

26:02spends all his time basically creating

26:04all these crazy crazy statistics. and he

26:06basically just did a a tweet about the

26:08volatility um you know apexes of of the

26:12market from 9 9:30 to 10:30 is the most

26:15volatile time in the in the equity

26:17market that is the graveyard of

26:19scalpers. It is because what happens is

26:22even if you're right, you buy something

26:24right, it will retrace so much against

26:27you like it will stop you out 10 times

26:29be before it will go it will go up to to

26:32your target but you will have been

26:33stopped out 10 times by you know by just

26:35just by the by by the movement of the

26:37thing. And so you know this you know

26:39subconsciously but when you have the

26:41data in front of you it's like sitting

26:43there and saying no you're an idiot you

26:44know this is red you shouldn't be it's

26:45so much easier to to not fall for fall

26:49falling for the lie that's really going

26:50back to the idea of falling for the lie

26:52you know the market is going is going to

26:53try to trick you and if you have the

26:55data on your side it really helps you

26:57knowing it's like like a guy who really

26:59you know who's playing poker but he

27:01knows he knows he's got the poker

27:02computer he's got a computer in front of

27:04him he knows exactly what the odds are

27:05so he's making much better decisions

27:07than somebody who doesn't.

27:08>> For the last two years, a proud sponsor

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27:47firm. And with that being said let's get

27:48back to the episode.

27:49>> You know

27:50>> when when you're putting things through

27:52AI which everyone has access to but I

27:53think the the reason people don't is

27:56because either it feels intimidating or

27:58I don't know what to look for. I don't

28:00know what to test. So because I have a

28:01whole strategy I don't know how to code

28:03it.

28:04What are we testing? Are we testing the

28:07trade itself in terms of I've got to

28:09code what a breakup structure is and

28:10I've got to get granular. What is a

28:12break? How many pips XY Z? Or are we

28:14coding variables like time u like

28:17amplitude and so forth?

28:19>> Well, that's the the key to AI which is

28:21what makes it powerful but also kind of

28:23difficult is it has all the answers. The

28:26key is to ask it the right questions.

28:28That's the hard part. You know, AI has

28:30all the answers. uh it's much smarter

28:32than you are, much smarter than anybody

28:33is, but you need to figure out which

28:35answers to that's really the trick of

28:37working with AI is figuring out which

28:39which questions. So, one of the

28:40questions I figured out was um almost

28:42any some strategies are just horrible.

28:44Like some strateg you you'll give it to

28:46them and it will just literally tell you

28:48this is the worst thing ever. Like there

28:50is zero edge here. You're going to bleed

28:52your way. And then you say and other

28:54strategies are like mid, you know, like

28:56they're maybe they have a small edge or

28:58they they're basically break even. But

29:00you say break it up into like time in is

29:03is you know does a strategy work during

29:05specific time because what you think

29:06about what is a strategy strategy is

29:08codifying human behavior. You're

29:10basically you're trying to figure out

29:11every single day, you know, the market

29:14does certain behavioral things, but the

29:16crowd in the market, you know, at the

29:19you know, at the open, we all know they

29:21they they ramp it, right? Like there

29:23like one of the things that you could

29:24do, which is fun if you're trading for

29:26prop, right? Is it's almost uh there are

29:29certain prop firms that will let you

29:31just do a single trade, right? They'll

29:33just let you do a single trade um uh

29:36funding. uh you know that there's going

29:38to be 30 40 50 point vertical move

29:40because in order to kind of get funded

29:42in one trade, you you need no

29:44retracement. When does that happen the

29:45most? On the opening candle of the of

29:48the of the uh of the market because

29:49there's so much demand, right? You have

29:51to just basically satisfy all that

29:52demand before everybody comes in. So you

29:54could actually, you know, have fun

29:55trying to do that. Now, sometimes you're

29:57going to be on the wrong side. You're

29:58going to think it's going to go up and

29:59it just drops like a stone. Sometimes,

30:01you know, sometimes it doesn't quite do

30:02it. Sometimes it waits two or three

30:04minutes before it does that. Whatever.

30:05But the point is at least you can you

30:07can handicap that behavior. It's very

30:09it's fascinating. You know, the all

30:11you're trying to do is find common

30:14patterns of behavior throughout the day.

30:16If you're a scalper that um that give

30:19you the the the probability of winning

30:21the trade. That's it. You know, you you

30:23know, I have a confidence of 70%

30:25probability I'm going to win this trade

30:26because during this time of the day,

30:27that's what people really generally like

30:28to do. Um now, that's you know, going to

30:32change probably in three months or four

30:33months. That's why you know I was

30:35talking to to your producer earlier that

30:36I was saying that you never test data

30:39more than two or three months on if

30:40you're doing high frequency trading

30:42because the market changes character all

30:45the time. High frequency funds the guys

30:47who are the multi-billion dollar

30:48citadels

30:49>> they change um five sigma two sigma

30:53whatever uh they change their data they

30:55change their algorithms every two or

30:56three months because they know that it's

30:58they're already operating on stale

30:59assumptions. So how do you navigate in

31:02that case where the markets are in the

31:04granular in the nuance changing and

31:05shifting evolving every couple of

31:07months?

31:07>> You you never stop. You never stop

31:09testing. You never stop. You never This

31:11is the thing I think that's the thing

31:13about trading is you you know people

31:15like oh I have a strategy I'm set for

31:17life. No, you constantly have to stress

31:19test. Just like everything in life you

31:21never stop trying to get better.

31:23Everybody else you know around you is

31:25going to change because things change.

31:26you know, environments change,

31:28presidents change, you know, geopolitics

31:31change. Uh, I mean, look how different

31:32this country is, you know, in these four

31:35years than it was in the last four

31:36years. And it may be very, very

31:37different in the next four years. And

31:39all of that is going to have massive

31:40impacts on the stock market. Like four

31:43years ago, everybody was trading crypto,

31:45right?

31:46>> Yeah.

31:47>> Does anybody talk to you about crypto

31:48anymore?

31:49>> Right.

31:49>> So, this makes me very curious because

31:51on I knew the market evolved because I

31:53felt it. I've been in the market for a

31:54decade and what I was doing 5 years ago

31:56is totally different. But I didn't I

31:58didn't suspect it would be, you know,

31:59almost quarterly, which begs the

32:01question for me now is let's say I go

32:03through a two-month losing period or

32:05it's just not where it used where it

32:06should be. Let's say I can now attribute

32:08it to a few things. I could say alpha

32:10decay. I need to now go back to the

32:11drawing board. I could also say I'm not

32:13perform performing. So it's an adherence

32:15issue, my psychology XY Z. Or it could

32:18also just be this is a valid losing

32:19period. This is part of the edge. Uh

32:21just keep seeing it out. How do you

32:23separate the three when the P&L shows

32:25the same?

32:26>> Assume alpha decay like assume the worst

32:29I'm always assume the worst case

32:30scenario and really really really stress

32:33test that you know has because generally

32:36that's going to be the number because

32:37people the thing is what happens is

32:39everybody wants to make an excuse oh you

32:41know I'm just not feeling today or the

32:43market you know today you know people

32:45always like to make you know it's not me

32:47it's just that the market wasn't good.

32:50No, it's actually you because you're not

32:52being diligent enough to figure out the

32:55market has changed. You know, the market

32:56has changed a little bit. Or what has

32:58changed? May maybe maybe the setups you

33:00were trading in London no longer work in

33:02London. they now have, you know, they

33:04work they work in Asia or they they they

33:05they work in New York or maybe they

33:07don't they no longer work on the pound

33:09because because the whole monetary you

33:11know system of of of UK has changed

33:13completely and now they work much better

33:15on the Swissy or some or you know or or

33:17the yen or the look look at the change

33:19in in the yen you know Japan was I was

33:22actually shocked I haven't I haven't

33:24like traded you know even looked at the

33:25Nikk Nikk is like 60,000 I was like gez

33:27wow you know like but that's a function

33:30of the fact that Japan has completely

33:31changed we're still in that mindset of

33:32like you know deflationary Japan for the

33:34last 20 years right that you need to be

33:37you need to always know what's going on

33:40that's the great thing about the market

33:42is it's the greatest thing in the world

33:44to keep you engaged in the world there's

33:46no other way like where else can you

33:49express an opinion and actually have

33:52money on it you know like have actually

33:54make money on it

33:55>> that or a casino I guess

33:56>> right but you know but the casino it's a

33:58fixed odds game that's the other thing

33:59is casino games are fixed that's that's

34:02you know They never change.

34:03>> I want to get into that topic later

34:04which is the parallels between casino

34:06and prop firms. But let's save that. But

34:08the the question I have here is

34:10>> this sounds exhausting. If every 2 3

34:12months there could be an alpha

34:12[laughter] decay. Um now I need to kind

34:15of reinvent myself and and stress test

34:17it and look for opportunities again. Uh

34:20I'm sure it's not a case of back to the

34:21drawing board. I'm sure you you have a

34:23process of stress testing and then

34:25curiosity or creativity of what avenues

34:27to explore. Maybe hierarchy or first try

34:29try time or first try assets. What is

34:31your process from alpha decay to find a

34:33new edge?

34:34>> Um, honestly, listen, it it it's not

34:37nearly as it's not that you have to

34:39reinvent the wheel. You just have to

34:41modify the wheel. That's the whole point

34:42is like my strategy has never really

34:46changed at its core. Like my strategy is

34:48basically trading momentum, right?

34:49That's really what I'm trading. I'm

34:50trading momentum. But how you trade

34:51momentum, when you trade momentum, what

34:53are the components that really create

34:55momentum in this particular strategy?

34:57What instruments are really responsive

34:59to momentum and which ones are not

35:00responsive to momentum? What hours of

35:02the day has this you know has momentum

35:04really really taken off? What a little

35:06quirks are happening that you know can

35:09modify. So the questions are all around

35:12the general the the principal idea

35:14doesn't change. You don't have to

35:15reinvent you know oh you know I'm never

35:17going to trade you know head and

35:19shoulders. No you simply ask yourself

35:21what is head and shoulders you know what

35:22is doing now? Where is it failing? Why

35:24is it failing? If it's failing like

35:26this, is it an opportunity for me? Is it

35:28really? You know, look at this. It's

35:29actually what the inverse head and you

35:30know the not the inverse head and

35:32shoulders, but the inverse inverse of

35:33head and shoulders is you know because

35:35inverse head and shoulders is a

35:36different pattern. I'm just saying but

35:38you know like what if I you know what if

35:39I trade that um uh because because the

35:42market has changed that could be really

35:43interesting. So I always think I always

35:44find that to be incredibly fascinating.

35:46I I love the challenge of like never let

35:51your losses defeat you. there always an

35:53opportunity to learn something new and

35:56valuable and stronger and better. You

35:58know

35:59>> what I like the idea of is when people

36:01come into trading, we all start off at

36:03the same kind of places, baby pips,

36:04trading 101, etc. And we all learn core

36:07principles like top down analysis,

36:09trend, trend line, support, resistance,

36:11XY Z. And one of the biggest things that

36:14people say is M1 is noise, lower time

36:16frame is noise, stick to the higher time

36:18frames because there's more money,

36:19there's more weight, XY Z. But then

36:21you're in and out of a trade in 5

36:22minutes and you're trading the M1. So,

36:24how do you find clarity when most people

36:26see noise?

36:27>> Well, um there's noise in everything and

36:30there's it's it's just a matter of like

36:32which zone you like to operate on, you

36:35know. Um I I don't I don't even know

36:37like what the word noise is. There's a

36:40pattern in on every time the markets are

36:42not noise. They're fractal. I actually

36:44do believe that and that's a you know

36:46that's a mental broad idea and I think

36:48it's it's it's really a really valid

36:49one. meaning that and that's very true

36:51in nature there the the patterns that

36:53you know repeat themselves are the same

36:56on the most granular level as they are

36:58on a huge huge level ultimately if you

37:01look at a chart it's waves it's just

37:04waves it's price is moving up and down

37:07just like a wave right so on a one

37:10minute chart it's just a whole bunch of

37:11smaller waves on a you know larger chart

37:14it's it's just the waves are just bigger

37:16you know the waves but it's the same

37:18pattern um you just you know the thing

37:20that you're doing is you like this

37:22particular you have the domain expertise

37:24in this particular uh situation you know

37:26you want you you're watching this to

37:29trade the the one minute chart you have

37:31to really be in you know you can't like

37:34put a trade on walk away and you know uh

37:37come back two weeks later it's a

37:38different lifestyle like that's another

37:40thing is do you know what kind of a

37:41lifestyle do you want to have um you

37:43know if you want to have a lifestyle

37:44where you just place a trade and walk

37:45away trade options you know I think I

37:48think that's Yeah, that's what you

37:49should do.

37:49>> So, I'm curious to know what are drivers

37:51of price? For example, on a year-to-year

37:54time horizon, it's going to be the

37:55biggest of fundamentals, interest rates,

37:57and so forth. And then you get down to

37:58midtime frames, it could be sentiment,

38:01positioning, XY Z. But then when I get

38:02down to the M1, you know, interest

38:06rates, inflation, they're not going to

38:07affect this next 10-minute price action.

38:10>> M1, it's really headline news, right?

38:13Oh,

38:13>> so you have so you have whatever

38:15whatever is the news of the day and then

38:16you know is the market the general

38:19reaction is you have a news you have a

38:20big knee-jerk reaction up or down right

38:23and then the market absorbs it and it

38:25either accepts the news in other words

38:28says oh you know this is pretty good you

38:29know and then more and more people kind

38:31of join that idea and they start bidding

38:32the whole thing up or it's negative and

38:33they start selling selling it on the way

38:35down because they because what they're

38:36doing is they're projecting the news

38:38into the next week or you know two weeks

38:41or or forward and So they start

38:43anticipating that move and that's what

38:44creates trends and you can you know you

38:45can ride those things or the exact

38:48opposite it's news everybody goes okay

38:50and then there's something else that's

38:52going on usually one of the things

38:54that's uh it's very hard to do but like

38:57it's really one of the best things is

38:58you have like positive news and the

39:00price action just goes really negative

39:02or you have negative news and they just

39:04keep buying and you're like and most

39:06people go it's ridiculous you know

39:08inflation is 10% how can the stock

39:10market up I'm going to short I'm going

39:11to short I'm going to short and you

39:13never will you lose more money than

39:16betting against something that seems so

39:18obvious like you know where you have

39:19negative news and posit negative news

39:21positive price action. That means what

39:23that means is that there's something

39:24else going on that you don't know about

39:27that is much more important that people

39:29who are much smarter than you are

39:30betting on. That is really what the

39:32driver is of the price action. And

39:34generally like you know like the simple

39:36example now is like you know you have

39:37big um uh inflationary data you know

39:40that comes out but the market starts

39:41rally well that's because people are

39:43anticipating that maybe the the Iran

39:45Iraq Iran the Iran war is going to um

39:49you know be moderated and that prices

39:50are going to go down or or or that oil

39:53itself is just you know being pumped

39:55somewhere else and and and the ships are

39:57all going around the straight of harm

39:58whatever there's a thousand variables

40:00that you are not aware of

40:03>> that people who are much smarter than

40:04you are aware of and if you are you keep

40:07you keep selling to them and they keep

40:09taking away your money because you're

40:10betting on on information that's

40:12immaterial. So yeah I mean that's what

40:16happens on a day-to-day basis. Then then

40:17you also have on a on a in hour you have

40:20like certain path like you know you have

40:22the morning open the morning rally or

40:24the morning dump then you have the

40:26consolidation and the reversal of

40:27whatever is happening in the morning

40:29right then you have the lunchtime quiet

40:31and then you have the final hour

40:33resolution um you also have the London

40:36open and you have the same kind of you

40:37know dynamics over there you it's a play

40:40it's like it's like watching a play

40:42>> so what I've done is I I've just called

40:44this a daily cycle and you can see I

40:46mean every day is going to be nuance a

40:47bit different but there is plays that

40:49you see uh from a price from A to B you

40:52can have variations from the sessions

40:54and then the road map that I like to

40:56call it

40:56>> so what I what I've just thought and

40:58found is on the longer time horizons

41:00there's a lot of driving factors but on

41:02the lower time horizons it's it feels

41:04like it's more technicals technicals

41:05drive price

41:06>> 100% oh no I that I agree like yes I

41:09mean if you're sort of saying if I'm if

41:11I'm a hedge fund and I'm betting the

41:12next 10 you know my wife's a hedge fund

41:14manager she never looks at a chart, you

41:17know, for life dependent because she's

41:19looking to forecast earnings of a stock

41:21for the next two years. She really knows

41:23the business super well. She understands

41:25everything this company is doing and

41:27she's betting on the fact that they're

41:28going to have like, you know, gang

41:29buster numbers. And that eventually like

41:31she'll buy a stock, it'll sit dead for

41:3410 months and then she'll make double

41:35her money in a week. You know, that's a

41:37completely different approach than when

41:40you're tra if you're trading short term.

41:42There's only one thing that matters is

41:44price. at technicals is just a study of

41:46price. That's what you're doing. You're

41:47studying price.

41:48>> Nice.

41:49>> So, I want to get back to this idea of

41:50the game theory self-fulfilling

41:52prophecy, which is if everyone sees a

41:54support level and everyone trades a

41:55support level and it's on the shorter

41:56time horizon, so we can kind of

41:58eliminate the effect of long-term

41:59fundamentals,

42:00>> then everyone places and you get a

42:02concentrated area of orders and stops

42:04and then you do see that get flushed

42:06often. Um, what is that manipulation

42:09process? Is that a them versus us? Is it

42:11a conspiracy theory or is it market

42:12mechanics? No, it's market m. First of

42:14all, there's no such thing as a

42:15conspiracy. Remember, it takes one guy,

42:18right? It takes one guy with size. It's

42:21not conspiracy. It's whoever's got the

42:23biggest bankroll at that particular

42:25moment, right? And it could be something

42:28totally random. It could be this Saudi

42:30Aramco treasurer who needs to, you know,

42:34get hundred million dollars for payroll.

42:36So, he says, "Sell, sell, you know, sell

42:38my S&Ps."

42:39There there's a lot of market

42:40participants who are completely price

42:42insensitive. They are speculative, you

42:44know, and but they're huge. So if

42:46somebody says, you know, sum your a

42:47billion S&P, it doesn't matter whether,

42:50you know, you think that this is a

42:51confluence of 5,000, you know, Fibonacci

42:54level, it's going to blow through it.

42:55He's not he's he couldn't care less.

42:57He's like a guy completely oblivious to

42:58your technical, you know, formation. So

43:01yeah, I there I always laugh when people

43:03say that there is people out to get you.

43:05Nobody's out to get you. It's just

43:07simply that you don't know everybody who

43:09is in the market. That's what makes it

43:10so interesting. That's why risk control

43:11is so important. That's why doesn't

43:13matter how strong you feel about a

43:15position. You know, if you break that

43:17level, you need to be out of it. You can

43:19always come back to it. But if you break

43:21that level and you start I love to watch

43:23the most interesting videos on YouTube

43:26that I watch actually are not the guys

43:28who who win a million dollars. I love to

43:30watch all the guys who lose a million

43:32dollars. Those are by far the most

43:33educational videos because you know

43:34what's happening in those things? You

43:35see this because I recognize it myself

43:37and I and I to me it's it's actually

43:39incredibly valuable. You see everybody

43:41who has a brilliant plan this the trade

43:44goes against them and now they start to

43:46justify oh Tesla is a good stock it's

43:48got lots of momentum they're going to

43:50start buying it. It's really you know

43:52they have this new product coming out.

43:53Do you think any of that matters in that

43:55particular of course and they just see

43:56their price go down go down go down or

43:58or technical and that's look you know

44:00there's five confluence levels over

44:02here. I can't believe they broke it. You

44:03know it's going to it's going to bounce

44:04back now. you know it's going to buy and

44:05it just keeps going down and down and

44:06down and it's fascinating to watch

44:08people lose money because you realize

44:10exactly why everybody loses. It's got

44:14nothing to do with

44:15>> I think the common denominator as you

44:16were saying earlier is human psychology

44:17where everybody in a trade that they've

44:19entered that there was high conviction

44:21and it goes against them. They move the

44:23stop. They get hopeful. They're

44:24optimistic. They think it's going to go

44:25their favor. But the moment you're in a

44:27trade and it's profitable, you're not

44:28thinking hope and optimism. You're

44:30thinking what if it reverses? What if it

44:31goes back? So you become pessimistic.

44:33Same price, different emotions, which

44:35which is the common thread.

44:37>> I I was referring back to earlier when I

44:38was talking about the manipulation when

44:40you're talking about the ICT, fair value

44:42gap uh play where if everyone sees

44:45everyone trades it and no longer works.

44:46What what was that mechanism you were

44:48you were describing?

44:49>> Oh, it's just basically look if

44:51something becomes very very popular then

44:54remember the whole point of all

44:56speculators is to exploit other

44:58speculators, right? It's like

45:00speculation is a game of observation and

45:02like it's you know once you know

45:04everybody's betting a certain way you

45:06can just handicap their that's the great

45:08thing about human beings are in in

45:10incredibly inventive and always always

45:13innovative in figuring out you know how

45:16to change people's behavior incentive

45:18they know if everybody's incentivized

45:19this way well there's a there's an edge

45:20here of just making sure that I you know

45:22if I you know flip everything the other

45:24way around they'll flush it so I think

45:26you know a lot of the popular technical

45:28ideas um get exploited once once they

45:31become deep enough because they know

45:32that there's a you know there's a lot of

45:33money bet on that side of the trade it's

45:35easy money to take to take it away

45:37because people are all going to fold uh

45:39right away but you know like ICT

45:41actually you know we I trade with ICT

45:44order blocks I found that to be

45:45incredibly valuable as like I the last

45:48thing in the world I thought that I

45:49would actually like was ICT and actually

45:51very very helpful to the original

45:54momentum idea that we have you know the

45:56momentum dos idea that I trade

45:58um it does help me you know it it it

46:01definitely uh orients you on the right

46:03side of the trade in that particular

46:04time frame.

46:04>> Yeah, even on this topic of an order

46:06block I we've all seen it play out but

46:08it's more important we've also seen a

46:10million get blown. So then it's like how

46:12do we select the right things? So I

46:14guess the next part of the conversation

46:15I want to get into. We all know

46:16confluences. We all know the basics of

46:18trend and XY Z but how do you qualify

46:21concepts, confluences, theories and

46:23ideas to trade models and plays? Well,

46:26and that's where I that's where I was

46:28talking about that you have to first of

46:29all, you have to understand that there

46:31is no such thing as a trade strategy.

46:34There's only um a certain sort of

46:37behavior that comports with the

46:39environment that exists now. Like if you

46:41look at evolutionary biology, right? Uh

46:44dinosaurs ruled the earth for millions

46:46and millions and millions of years,

46:47right? And then there was just this one

46:49big event that blew everybody up and

46:51then the mammals took over, right? And

46:53we became much better adapted to the new

46:55environment just like a new strategy

46:57becomes much more adopted. Like for

46:59example,

47:00this is the thing. This the only this

47:02good advantage of being old. If you

47:05trade um in the 1970s the way everybody

47:10trades now, like trade the stock market,

47:12not commodity. Commodities were actually

47:13like incredibly momentum. If you traded,

47:16everybody right now is basically a

47:17momentum trader, right? If you think

47:19about this, for the last 30 years, we've

47:22had nothing but, you know, either

47:23straight up or buy a dip and it's always

47:25going to recover, right? But in the

47:27between 1968 and 1981,

47:31if you traded stocks that way, you

47:33literally lost money every single day of

47:36every single week of every single month

47:38and you burnt yourself, right? And so in

47:41that time, people really got used to the

47:42idea of selling tops, buying bottoms,

47:44selling tops, buying bottoms, selling

47:45tops, buying bottoms. And they were

47:46really the ones that that were doing

47:48that got really really wealthy until

47:49like 1981 when the Dow broke you know

47:53broke the the thousand and everybody's

47:54like oh it's still going to be selling

47:56like you know selling times but like

47:58people probably don't remember this guy

47:59named Robert Prector he was Elliot wave

48:01theory he was incredibly inc he was like

48:04a man who you know walked on water and

48:06he was basically trading this whole idea

48:08of like things are going to come down he

48:09said um you know the Dow like I think

48:12the Dow he he when after the crash the

48:1487 crash actually he the Dow was going

48:16to go to 700. Of course, it, you know,

48:18never came close. Dow went to 5,000,

48:2010,000, 11,000. He kept saying it's

48:23going to go crashing down because he was

48:24still in that mindset of like he was a

48:26dinosaur. He was the dinosaur. So, all

48:28trading strategies can become dinosaurs.

48:31And there is no, you know, the point is

48:34the question you want to ask is it

48:35working now? That's really the only

48:37question is, you know, I like the old

48:40the old joke, you know, I'm not

48:41interested in Mr. Mr. Right. I'm I'm

48:43interested in Mr. Right now. That's how

48:45you should be thinking about your

48:47trading strategies. Is it working now?

48:49That's your only question as a trader

48:51and if it is, go with it. If it isn't,

48:53you really really want to put it under a

48:56stresses and understand why it's not

48:57working.

48:58>> So I I I completely understand what

49:00you're saying here where we have certain

49:02things that are potentially correlated

49:04and certain things that work for periods

49:06of time, but there are other things that

49:07I would call is just evergreen. It's

49:09essence of the market. For example, buy

49:11low, sell high. You could say that's an

49:13essence. You know, at certain areas

49:14there's going to be a market auction

49:15because concentrated orders and activity

49:17like a breakout. People are seeing a a

49:20sweep of liquidity. They're looking to

49:22sell. Others break test look for the buy

49:24inflection points. So would it be more

49:26worthwhile than looking for these

49:28evergreen things for example momentum is

49:30always going to be there. Momentum

49:32timing is probably always going to be

49:33there. Is evergreen moments the thing to

49:35find as a common thread of a strategy

49:36then? Yeah, I actually yes I I abs So we

49:40know statistically this is not even

49:42anything controversial. We know

49:44statistically that the only thing that

49:46has completely not been whittleled away

49:50in in efficient market theory is

49:52momentum right momentum has performed

49:56across assets times

50:00different markets. You could trade the

50:01DAX and you know you could have trade

50:03the Swiss market and moment and you

50:04could have trade New Zealand. It doesn't

50:06again it's not a panacea. In other

50:08words, there are periods where momentum

50:10really really does horrible but what it

50:13shows is that it actually uh things go

50:16up or things like momentum works. Um it

50:19is not a uh uh noise you know it is it

50:24is a true true function of the market.

50:26>> Is momentum a cause or an effect?

50:31>> Um that's a great question. I would say

50:35it's an effect because the you know

50:39what's what's causing is it's demand

50:42supply right it ultimately the market

50:44like you said I think the what great the

50:46great thing to do is is to actually go

50:47to fundamentals of what is a market it's

50:49an auction if you understand ses if you

50:52understand van goes if you understand uh

50:54picassos you probably should would

50:56understand you know vertical markets

50:58much better if you thought in those

51:00models than if you were looking you know

51:01for for your you know your tiny little

51:03tibon retraces. So understanding the the

51:06core essence of what the market is which

51:07is an auctionbased structure right uh

51:10with demand supply and also um people

51:15who are wrong right that's the other

51:18thing that people I think misunderstand

51:21is your best you know trades are often

51:24when everybody else is on the wrong side

51:26of it and they have to cover like

51:28because

51:29>> like you said you know um

51:32>> the market is a zero There are some game

51:35money. Money is infinite in aggregate

51:38but finite in individual, right? And

51:40it's the we all have just a finite

51:43amount of money. We're all going to cave

51:44in. We're all going to cave in

51:46eventually uh to the market whether we

51:49want to or not. And like finding those

51:51points of inflection where people are

51:53caving in is really really valuable.

51:55>> Yeah. So the the building blocks I'm

51:56getting at and I've got a couple more

51:57questions to kind of build a foundation.

51:59So uh when we have an auction is usually

52:02where there's going to be many ideas and

52:04it's not about manipulation. It's just

52:06about certain price action reveals

52:08multiple variables or multiple

52:10strategies and therefore multiple

52:12participants auctions happen and

52:13naturally that's a byproduct means

52:16momentum volume and therefore activity.

52:19>> So therefore if uh momentum is a effect

52:22and the cause we can we can discuss but

52:24it's always an effect that's what we

52:25want. We we want to get into a trade and

52:27it goes in a direction whether our favor

52:29or not. But then the next question

52:31becomes for me is should momentum and a

52:34trade therefore be predictive? We are

52:36predicting where momentum is going to

52:38happen and trade is going to happen or

52:39is it reactive? It's like once it's

52:40confirmed we get in.

52:41>> That that's such a great question. So

52:44God I hate to be that guy but like

52:45sometimes it's predictive. Sometimes

52:47it's reactive. Um but the whole point of

52:51like my strategy is based on the idea

52:53that it's predictive, right? Like I mean

52:55ultimately like all my green hours the

52:57hours when I'm supposed when momentum

52:59strategy is supposed to be working the

53:00very the fund fundamental theory is that

53:03it's predict you have momentum that

53:04means it's going to lead to more

53:05momentum like that is it is a pred the

53:07the breakout is the prediction of

53:09further price action that is literally

53:11the foundation of my strategy and I

53:13think almost every every breakout

53:14strategy that's the underlying idea. So

53:16yes um it does have a predictive factor

53:20uh once it starts failing that's the key

53:22thing. The key thing is once it starts

53:24failing what you need to ask yourself is

53:27uh why you know is the tenor of the

53:30market the reason why momentum is

53:31working now is because we're in a

53:32momentum market you know the markets

53:34itself the the broad the the small waves

53:36are working because the big waves are

53:38working right the tiny little waves are

53:40working because ultimately the ocean is

53:42moving up in one direction right but if

53:45the ocean is just dies like just dies

53:48and there's no price action you know

53:50those small waves are not going to work

53:52you And that the thing is you need to

53:54always ask yourself, you know, where's

53:55the ocean right now? C

53:57>> can you walk me through one of your high

53:58conviction plays, a trade model on how

54:01you do the analysis from start to

54:03finish? Uh, and also maybe separated for

54:05me trade idea versus traded idea, how

54:08you turn an idea to an execution.

54:11>> Um, well, so I have, again, I'm a

54:15scalper. So that means I don't have a

54:18grand trade idea. I have we have a model

54:22that model that model by the way I

54:24actually looked at it today just just

54:25for for you know amusement sake um

54:29really works well on much longer time

54:31frames I was like shocked I was like wow

54:32this these breakouts work so much and

54:34again why is the breakouts working so

54:35much better on longer time frames

54:36because the the ocean is moving the

54:38>> as you said the market is fract the

54:40market is fract the market has just been

54:41like the market we went from 20 you know

54:437,000 to 30,000 of course you know these

54:46these big waves are going to work just

54:47as well as the small ones but with me.

54:50So, our approach is is I'm going to be

54:52trading 30 40 times a day, which means I

54:54don't have Yeah. I don't have a a grand

54:59I very very often, this is very very

55:01funny. We always like we always laugh. I

55:03will have some sort of grand

55:05geopolitical news economic idea of where

55:09the market is going to go, right? And of

55:11course, the model is going to just give

55:13me completely opposite signals.

55:14Unfortunately, I've I've gotten old

55:16enough where I I don't listen to my

55:17opinion. and I listen to my model and I

55:19take the model and the model of course

55:20works and of course my grand I'm like oh

55:22the you know it's so negative today the

55:23market is definitely going to come down

55:25and then you know it rallies 300 points

55:26because I'm not seeing that underlying

55:28factor so I basically don't my opinion

55:33is just there for my own amusement I

55:35really trade the model that's

55:38>> it's pretty tough because you can have

55:39your opinion which is evidence-based

55:41thoughts and assumptions and then your

55:43model which is something data driven and

55:45if they're conflicting

55:47Why would you execute if it doesn't make

55:49sense to you? If it's not in line with

55:50your opinion or assessment

55:51>> because I've again learned that my

55:54opinion, your opinion, everybody's

55:57opinion, uh, you know, is not worth a

55:59lot. Like, we know there I I I want to

56:02be polite on on on the thing, but

56:04there's an expression in New York, you

56:05know, about everybody's got an opinion.

56:07The point being is that you think your

56:10opinion is valid, but you're missing

56:12something fundamental in the marketplace

56:16that um other people who are smarter

56:18than you are seeing. And that's a lesson

56:20like you know that honestly it's a

56:21lesson takes a long time to learn when

56:23it's time to take yourself so seriously.

56:25So yeah, at this point I am much more

56:27model driven. I like you know my if my

56:29if my model starts to fail then I really

56:31want to question that. But if I fail I

56:33fail every day. my my you know the

56:34beautiful thing about like being on on

56:36camera every day is you can record your

56:38own stupidity every day. You can you can

56:40start laugh at it you know because you

56:41can say oh my god you know I you know my

56:43prediction powers are about as good as

56:45uh um as an astrologer. Um

56:47>> how do you differentiate trade idea from

56:49model because it seems like you do have

56:50a separation.

56:51>> Oh so it it's not it's not so much trade

56:54idea. It's more like execution right?

56:56like the model the model gives you a

56:58signal, but there's so much that goes

56:59into especially when you're scalping

57:01that goes into quality execution and and

57:04bad execution. And that has to do with

57:07timing and chasing. Like one of the

57:10worst things that we all do is your

57:12model gave you a signal 40 seconds ago,

57:16right? It's going your way, but it's

57:19maybe four or five points already. You

57:21know, like you if you were if you were

57:23supposed to come in at at 50, now it's

57:2555. like, "Oh, it's still good. I'm

57:26coming in." What are you doing at that

57:28point? You are destroying your whole

57:32model because your model is based upon

57:34the idea of you coming in at 50, right?

57:36Going to 60. Now you're at 55. So maybe

57:39it goes to 60 and you get lucky, but now

57:41you're only making five instead of, you

57:43know, 10. And if it if it comes back

57:45down to 45, now you're minus 10. In the

57:47other in the other condition, you would

57:49still be in a trade and maybe have a

57:50chance to rerally. In this condition,

57:51you're stopping yourself out. So, you're

57:53setting yourself up for failure. We set

57:55ourselves up for failure all the time in

57:57the market by FOMO. You know, you talked

58:00about um I forgot, you know, you you

58:02were saying

58:03>> the big emotions,

58:04>> the big emotions. To me, FOMO is by far

58:06and that's what the market really really

58:08does. The market loves to play with

58:10FOMO, you know.

58:11>> So, I've only spoken I've spoken to a

58:13lot of scalpers, but on the show, I've

58:14only spoken to a couple of traders who

58:16are uh I want to call it hypers scalping

58:1830 executions in a day. uh but the

58:20framework that from what I recall they

58:22had was not necessarily uh price action

58:25driven in terms of technicals was more

58:27looking at the order flow and trying to

58:29assess on the level two

58:30>> an auction happening an auction failing

58:32buyers absorption buyer strength all of

58:34these kind of factors is this an area

58:36you're using

58:37>> no it's actually very funny because um u

58:39you know I I have a friend uh from one

58:42of you know one of the firms that we

58:43work with Ola prime Sam and um he does

58:47that kind of stuff like like I'll I'll

58:48bring him on stream right now and he

58:50will look at volume and he will look at

58:52the u uh the delta and everything else.

58:56Um and I will trade like what we'll do

58:57is you know he'll narrate what he wants

58:59to do and I'll what I want to do and

59:01very very often like 95% of the time

59:04>> our signals are in confluence because

59:07I'm trading price action he's trading

59:09he's trading. So my whole point is that

59:12I don't need to look at um the internals

59:15of the market because they're going to

59:16be reflecting the price. And if they're

59:17going to be reflecting the price, it's

59:18going to my algorithm is going to catch

59:20it and I'm going to I'm essentially

59:22trading the same idea from from a

59:23different

59:24>> I still haven't got a full grasp of uh

59:26what is it that you're trading? What is

59:28the execution or what is it in the

59:29technology?

59:30>> Oh, what am I? So the it's it just these

59:32are specific momentum breakout patterns

59:34on a one minute chart against uh VWAP

59:38ICT order blocks you know 8 period SMA

59:41nothing really really complicated we're

59:43the the most you know we're always

59:45looking for let's say the the one minute

59:47candle to close at or at or above if if

59:53you want to be buyers the high of the

59:55prior candle. We want to see forward

59:57action that actually makes progress,

59:59right? You like, you know, you move 50

1:00:02steps and you're you're now ahead of

1:00:04where you were before and then I'm going

1:00:05to make the bet that you're going to

1:00:06make another 50 steps forward, another

1:00:0750 steps forward because that's that's

1:00:09how journeys start. They start with

1:00:11forward progress, right? If you sort of

1:00:13like, you know, journey start and that's

1:00:14we're trading that idea in a, you know,

1:00:18lots of refined ways with lots of lots

1:00:20of statistical inputs to help us pick

1:00:23and choose the spots. And what that

1:00:24translates to is basically between three

1:00:27to five trades per hour

1:00:30>> with within the instrument and um you

1:00:33know dep and and also is either with

1:00:36momentum or against momentum depending

1:00:38on you know what time frame we're coming

1:00:39in. So I'm curious to know let's say at

1:00:41the start of the day you've got a good

1:00:42entry with the bias that makes sense to

1:00:43you for whatever reasons and we all kind

1:00:45of know average ATR the average daily

1:00:48range of something instead of getting a

1:00:50bunch of entries and then the cost of

1:00:51execution which which can become uh an

1:00:54issue why not get a good entry at the

1:00:56beginning of the day have the bias and

1:00:58exit at the average ATR

1:00:59>> if I could I would if I could I would if

1:01:01that was my personality I'm telling you

1:01:02that's why I say

1:01:03>> personality for it is absolutely

1:01:05personal my the cost of my commissions

1:01:08will horrify you I will run sometimes

1:01:1050% profits. Like in other words, if I

1:01:12made just for argument sake, if I made

1:01:14$1,000, sometimes $500 of that will be

1:01:16commission, you know, will be

1:01:17commissioned revenue. I don't care

1:01:19because it's not you, again, you have to

1:01:22Thomas Soul, who's like one of my

1:01:23favorite philosophers, said that there

1:01:24is no such thing as solutions in life.

1:01:26They're just trade-offs, right? And you

1:01:28have to make peace with what trade-offs,

1:01:30you know, you want. If you want to be

1:01:31happy, you understand what the

1:01:32trade-offs are in life. And you know,

1:01:34those are my trade-offs. I but they're

1:01:37not optimal but they are psychologically

1:01:40probable. The the thing in trading I

1:01:41think it's really important everybody

1:01:43tries to optimize

1:01:44>> for quantitative you know prediction or

1:01:47or quantitative result and what they

1:01:49should be doing is producing for the

1:01:52most psychologically palatable um

1:01:54possibility

1:01:55>> I guess for the sake of longevity.

1:01:56>> Yeah. For the sake of longevity because

1:01:58I know I'll be there tomorrow. I'll be

1:01:59there uh I'll be the next day. I'll be

1:02:01you know I've been around forever and

1:02:02I'm hoping I you know I don't want to

1:02:04retire. I want to be trading into my 80s

1:02:06and I and I love that. And there are

1:02:08guys in my room who are in their 80s who

1:02:09who love trading. It's a great fun thing

1:02:13to do, you know, in addition to

1:02:15obviously if you're doing it well, it's

1:02:17it's it's profitable, but it's it's it

1:02:19it to have that confidence is an

1:02:21incredibly great thing to do to to know,

1:02:23you know, you can walk into a market,

1:02:25have an idea, and have a reasonable

1:02:27chance of winning, which is so hard to

1:02:29do anywhere else. Yeah.

1:02:30>> So, now I want to talk about the

1:02:32profession of trading. uh finding alpha,

1:02:35discipline, execution, x y z and then

1:02:37also the other side is making money. Now

1:02:39obviously we assume it's all the same

1:02:41thing but off camera we were kind of

1:02:43discussing specifically with the online

1:02:44prop model which is uh like a casino the

1:02:48house always wins. The odds are skewed

1:02:50kind of against you. Plus there's a bit

1:02:52of a conflict of interest in there. And

1:02:53then also uh there's also some

1:02:56gamification elements because you have

1:02:57asymmetric gain potentially because your

1:02:59challenge fee might be 100 but your

1:03:01payout could be 2,000.

1:03:02Now you don't need an edge, you just

1:03:04need a positive expectancy on the game.

1:03:06>> So how do you navigate that? Should you

1:03:10just take your edge that you have and

1:03:12play it on the profile or should you

1:03:14modify it knowing that it's a game and

1:03:16then kind of hijack the process?

1:03:19>> Um, all above. But I'll before this, I

1:03:22will say this. I'm a huge prop firm fan,

1:03:25right? Regardless of how rigged the game

1:03:29is, for one very very simple reason, if

1:03:32you're new to the markets or even if

1:03:35you're not good at the markets, if

1:03:36you've been in the markets for a very

1:03:37long time, but just not good, have not

1:03:39found any success with real money, the

1:03:42ability to trade real markets, real

1:03:47prices, real execution, and refine your

1:03:50skills for the cost of a $100 and a

1:03:53potential maybe of a thousand payoff

1:03:55somewhere down the

1:03:56is so much better than burning $1,000 a

1:03:59week, $1,000 a week.

1:04:01>> You couldn't, unless you were a complete

1:04:02degenerate, you couldn't lose more money

1:04:06in proper fees than you would in two

1:04:08days, you know, two weeks worth of bad

1:04:10trading on your own account, which I've

1:04:11done a million times. So, um, from that

1:04:14perspective, it's an incredible

1:04:15educational tool. people, like you said,

1:04:18you know, they take it as a um as just a

1:04:21lottery ticket, but if you stop taking

1:04:23it as a lottery ticket and actually

1:04:25think about it as an entrance to school,

1:04:27as a really cheap uh tuition, it's

1:04:29really cheap tuition. Boy, could you

1:04:31learn a lot. You could learn so much

1:04:33both about your personality, about the

1:04:36markets, about strategies, about

1:04:37execution, all for very, very little

1:04:40with some potential eventually down the

1:04:42road for for payoff. So, I'm a huge prop

1:04:44firm fan from that. But having said

1:04:45this, yes, prop firms all create. Look,

1:04:49you have to like people understand like

1:04:50they act like prop firms owe them money.

1:04:52The whole model of the the prop firm is

1:04:55an insurance company, right? Insurance

1:04:57companies are not in the business of,

1:05:00you know, paying for your expenses.

1:05:01They're in the business Yeah. They're in

1:05:02the business of covering, you know,

1:05:03whatever risk they want, but they're in

1:05:04the business of making money, which

1:05:05means they're going to capitate risk.

1:05:07The whole the very essence of it means

1:05:09that they're that's why your life

1:05:11insurance is capitated at X amount of

1:05:13money. Even your health insurance is

1:05:14often capated x amount of money. Nobody

1:05:16is going to have un is going to give you

1:05:17unlimited amount of money because you

1:05:18happen to be an amazingly lucky prop

1:05:21from trader for you know like you're

1:05:22entitled to all that fake sim money. No.

1:05:25So I respect their models. The key thing

1:05:27is as long as their models are just fair

1:05:30and reasonable you know and I think the

1:05:33thing is competition has forced most all

1:05:35of them I think to to kind of create a

1:05:37relatively reasonable model at this

1:05:39point of

1:05:40>> pay. I think just looking at it from a

1:05:42place of in a healthy competitive

1:05:43environment, you know, the consumer wins

1:05:46because prices will be fair and

1:05:47conditions will be fair. And especially

1:05:49when you look at prop firms, their goal

1:05:50is to make money. That's the goal.

1:05:52>> The goal is not to scam. So if their

1:05:54goal is to make money, then the best in

1:05:56their best interest is to serve for as

1:05:58long as possible. But then there is the

1:05:59insurance policy side of like they've

1:06:01also got to cover their costs and

1:06:02liabilities. So it's that delicate

1:06:03dance, which is why we do see big

1:06:05players come and go. But uh the the area

1:06:08that I found myself these days is

1:06:10>> I I just ran simulations like you were

1:06:12saying with AI and I was running

1:06:13simulations with uh the same edge uh or

1:06:16even in fact I even ran another

1:06:17simulation which was uh good edge,

1:06:19average edge, terrible edge and I

1:06:21actually ran 12 equity curve types

1:06:22across 100 trades and one of them was

1:06:24like a slow climber slowly makes profit.

1:06:27Another one is like boom and bust and

1:06:28boom and bust but ends positive. Then

1:06:30you had the slow bleeder. Then you had

1:06:32the crash and burn. Total different

1:06:33equity curves, all totally different.

1:06:35And obviously you'd expect the guy that

1:06:37made 30% would make 30%. The guy that

1:06:38lost 30 lost 30. But if you cleverly

1:06:40orchestrate the accounts, yes,

1:06:42>> uh, all accounts made money.

1:06:44>> All accounts made payouts. And most

1:06:45importantly, more made more payouts than

1:06:47the amount they spent on the evaluation

1:06:48fees. That's when I realized it's a

1:06:50game. You're not incentivized to have

1:06:52the best edge. Because even on another

1:06:53model that I ran, the guy with the best

1:06:55expectancy, the best equity curve,

1:06:57didn't make the most money. the one that

1:06:59was making the most money was someone

1:07:00who had a high trade frequency uh and

1:07:02locked in payouts quick. Uh that became

1:07:05the model that you incentivized for. So

1:07:06I'm wondering what your thoughts is

1:07:07because I know you're deep into AI also.

1:07:08>> Oh no, absolutely. Because think think

1:07:10what you're doing. You're basically

1:07:11modeling variance, right? And over a

1:07:14short term a lot of people can get

1:07:15lucky, right? That's the whole thing,

1:07:17you know, like how do you tell luck um

1:07:19difference between luck and skill? Time

1:07:21really that's like time. And the thing

1:07:23is over a short period of time a lot of

1:07:25people you know I just got got lucky and

1:07:28and that's the thing with um the guy who

1:07:30um I think was the head designer of

1:07:33trading view said something really

1:07:34brilliant that totally agreed uh he said

1:07:36that basically when you look at the

1:07:37proper model it is a contest that's what

1:07:40it is you know they're running contests

1:07:43right so if you think about it you're

1:07:44entering into multiple contests with

1:07:47small variation on the rules and you're

1:07:49just trying to win as many contests this

1:07:53is possible, right? And that doesn't

1:07:55mean that you know that the the strategy

1:07:57you're using is actually going to be the

1:07:58one that survives or that is a viable

1:08:00trading strategy over a long period of

1:08:02time. It's just simply that strategy is

1:08:04optimal for that particular contest at

1:08:06this particular time. You know, if you

1:08:07have a strategy that like bets big on

1:08:10market, let's say you you let's just a

1:08:12stupid strategy. I'm going to buy the

1:08:14first candle of the S&P for five days

1:08:17straight, right? Maximum maximum risk,

1:08:19right? And if that five days the market

1:08:22was just you know soaring boom boom boom

1:08:25you are funded payout collected right

1:08:29just that's it you you you hit that you

1:08:30know you hit that lottery ticket and the

1:08:33thing is and like you said the great

1:08:34thing about prop firms and a lot of

1:08:36people do game that and I actually that

1:08:38I actually you know you can yell at the

1:08:40prop firms for for sort of creating you

1:08:43know unfair rules but you also I think a

1:08:45lot of people take advantage of prop

1:08:46firms because they'll buy thousands of

1:08:48these you know contest test tickets and

1:08:51they will just, you know, gamify that

1:08:53and see if if they can get paid out more

1:08:55than what they pay in. It's I think I

1:08:57forget what it's called. It's called

1:08:58proferform harvesting which is also, you

1:09:00know, like if you think about it,

1:09:02>> that's as scammy as a prof scamming you

1:09:05because because it's hurt it's hurting

1:09:06everybody else who's trying to sort of

1:09:08honestly trying to trade the market

1:09:10because the propers are then forced to

1:09:12pay out a lot of money to people who

1:09:14have no skill. They just they just

1:09:15>> but also introduce rules to stop that

1:09:17which then harms the in they've all I

1:09:20think the the most interesting thing in

1:09:21the prop firm space that that has really

1:09:23put the brakes on all that nonsense is

1:09:25the consistency rule of like making $150

1:09:29a day, right? Which seems very

1:09:30reasonable, but actually if you're

1:09:32gambling it, you know, it's much harder

1:09:35to to do that. And that's like my whole

1:09:38essence of what we try to do is actually

1:09:39do make $150 a day. Like if you can if

1:09:42you can master that skill, you will

1:09:45master trading for life. That's a skill.

1:09:48The whole idea is a when you're

1:09:49scalping, what you're mastering is the

1:09:51ability to trade for income, not for

1:09:53gain, but for income. That means the

1:09:55ability to trade small but consistent

1:09:57moves despite all the variance of the

1:09:59market. You know, surviving the variance

1:10:01in the market.

1:10:01>> Is there also I'm thinking of a sentence

1:10:04along the lines of uh two traders can

1:10:06have the same trades, same edge, but one

1:10:08can make a lot of money, one could lose

1:10:09money. All down to the trade management

1:10:11basically how you risk, when you risk.

1:10:13For example, if you risk up on a losing

1:10:14trade and your bad luck and then you

1:10:16risk out on a winning trade, obviously

1:10:17that's that's bad fortune. But just kind

1:10:19of putting the mechanics of risk

1:10:20management, trade management around the

1:10:22profit marina, is there a way to

1:10:24maximize your equity, maximize your

1:10:26gains simply through clever ways of

1:10:28approaching trade management and risk

1:10:30management?

1:10:31>> So always coming back from my

1:10:33perspective, I will tell you there's

1:10:34ways to minimize your blow up by using

1:10:37trade management, right? Yes, there's

1:10:39ways to m you know to maximize your you

1:10:40know your thing just simply getting

1:10:42large right large the best way to kind

1:10:45of make profits is you're going to a

1:10:48trade you're ahead on the trade you add

1:10:50to the trade and you know you keep

1:10:52adding until um uh as long as it doesn't

1:10:55slip against you. Now, that's like a one

1:10:56out of um you know, one of the prop firm

1:11:00founders who I'm close with said to me,

1:11:02I have no problem uh taking a trade a

1:11:05100 times a day and just stopping myself

1:11:07at break even 100 times a day. Now, I

1:11:09would go nuts. I would go nuts if I did.

1:11:11But you could you could you could you

1:11:12take a 100 break evens, right, a day?

1:11:14>> I get the logic, but hard in reality,

1:11:16but yeah, you still break. But this is a

1:11:18guy this is a guy who made,

1:11:20>> you know, seven figures because he has

1:11:22he has the discipline to do that. So,

1:11:24that's like optimal. But what I would

1:11:25say is, you know, the other way is um

1:11:28how do you minimize, you know, blowing

1:11:30up? And the way you minimize, especially

1:11:32in the prop space, is you trade lots of

1:11:34different accounts, you know, like I

1:11:36will I will trade one of the things that

1:11:38we do. Here's a trick, a couple of

1:11:39tricks that we do in my room. I will

1:11:40trade one account up to $100. Like I

1:11:44let's say we start at zero today or like

1:11:46you know, we say was the account's 200

1:11:48run to 300 and then we move on to the

1:11:50next account, move on to the next

1:11:51account, move on to the next. And what

1:11:52that does is it actually you know the

1:11:54equity rises all across your your

1:11:56portfolio but what happens is um you

1:11:59don't get stuck typically what happens

1:12:00is you know if you get stuck in one

1:12:02account and the market just doesn't you

1:12:04know cooperate. Now the account that

1:12:06very often people will will take an

1:12:08account up a thousand in the morning and

1:12:10then they're down 2,000 in the

1:12:12afternoon. They go how did that happen?

1:12:13That happened because you stayed in that

1:12:15same stupid account. If you just simply

1:12:17moved on to the next account you had you

1:12:19locked a thousand in. You would Yeah.

1:12:20You would have lost it in the other

1:12:21account. Who cares? There's, you know,

1:12:23propform accounts are cheap. You know,

1:12:25that's the that's that's the great

1:12:26advantage of propforms versus real money

1:12:28is that properform accounts are cheap

1:12:31relative to real accounts. So, losing

1:12:32one account out of 10 to bad market

1:12:35variance is fine. That's excusable.

1:12:38What's inexcusable is just constantly

1:12:40losing every one of those accounts. I've

1:12:42spoken to a variety of guests on the

1:12:44show and a unanimous common denominator

1:12:46between all of them is the emphasis they

1:12:47put on data and actually knowing the

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1:13:27description or code toot for titans of

1:13:29tomorrow. But what I found again this is

1:13:31all thanks to AI and maybe in my

1:13:33particular equity curve in my case but I

1:13:35found the optimal way to do it was run

1:13:37an account for uh four weeks on one week

1:13:40off but if you cross uh 3% only 3% in

1:13:44profit turn the account offline until

1:13:45the next online period and when I was

1:13:47floating the same equity go through that

1:13:49scenario I was able to squeeze out 30%

1:13:51more uh profit. So, it's just crazy to

1:13:54me that same effort, same money in, same

1:13:56everything. It's just when I decided to

1:13:58lock in payouts and when to how long to

1:14:00keep an account offline and how long to

1:14:02keep it online because then after a

1:14:04winning period naturally losing period

1:14:05comes. But if your account is offline

1:14:07and you put it on another one, this

1:14:09account is preserved. This account is

1:14:10going trash. Bin it. It cost me 100

1:14:12bucks and then you preserve this one

1:14:14locked in the payout. This is paid for

1:14:15the loss and it just becomes

1:14:17>> clever floating accounts mechanics.

1:14:19>> Why is that hard for us to do? because

1:14:20we get so emotionally invested into that

1:14:23I got to win this one account like you

1:14:25know we get emotionally invest because

1:14:26it's what is it I forgot the the

1:14:29psychological term it's like uh sunk

1:14:31cost fallacy

1:14:33that we just get completely invested

1:14:35that we I got to win or you know I got

1:14:37to come back from you know from this

1:14:39losing it's very hard to let go really

1:14:40really hard to let go but that's the way

1:14:42to do it you're right and what does that

1:14:44basically talk to it talks to the idea

1:14:45that there is no strategy that's really

1:14:47giving you the edge the edge is in you

1:14:50managing all of these different accounts

1:14:52>> and it amplifies it even to the point

1:14:53where a break even strategy a break even

1:14:55expectancy would generate payouts. Now

1:14:58when you when you just think about that

1:14:59it's like man I don't need to be a

1:15:00profitable trader to make payouts. No uh

1:15:02and there is a pocket of opportunity and

1:15:04then it's you got to be smart. What do

1:15:05you do here? Take the payouts reinvest

1:15:07it until you squeeze enough juice and

1:15:08then go to life capital and figure out

1:15:10an edge for for longevity.

1:15:11>> You got to be a good trade manager not a

1:15:13good trader right and that's the hardest

1:15:14part. Management skills are the hardest

1:15:16thing to get. I also found it

1:15:17interesting that that required no effort

1:15:19on my part, no psychology, nothing

1:15:21because I just ran it through AI. Maybe

1:15:23historically it was a skill to calculate

1:15:25it, whatever, but I just ran simulation.

1:15:27>> But you know, but here's the thing. It

1:15:28looks great in simulation. Have you

1:15:30tried it in real life? Did you find was

1:15:32it was it hard psychologically to do

1:15:34that?

1:15:34>> So I I think if I was to mentally keep

1:15:36the load, it's probably hard, but I

1:15:37created a whole AI dashboard and and it

1:15:39would log each account for me and it

1:15:41should just give me a lot and I mean

1:15:42it's like

1:15:43>> Oh, so you just you you removed yourself

1:15:45from from the I think the moment I

1:15:47removed all thought process and and

1:15:49realize this is chaotic anyway and I

1:15:51just have a dashboard. I mean AI just

1:15:53whips up a whole dashboard and like a

1:15:5520page Excel spreadsheet with everything

1:15:57tracked and as long as I'm keeping

1:15:58things inputed in there. The effort is

1:16:00taken off but this was not an op option

1:16:02a year ago. No. So that's what it's like

1:16:05it's like having a super super friend

1:16:07you know at your at your help and back

1:16:09and call. How are you using AI these

1:16:11days to serve you best or let's say even

1:16:13the future of AI and the future of AI

1:16:15with trading? I don't know what the

1:16:17future of I mean I think it's obviously

1:16:19only going to get I mean the natural

1:16:21future that everybody's talking about is

1:16:22is AI agents which is like you know you

1:16:24really um basically not even going to be

1:16:27making you're going to sort of create

1:16:29idea or AI is going to you're going to

1:16:31collaborate with AI to create ideas

1:16:32those ideas then going to be taken into

1:16:34actual software agents that going to

1:16:35start placing those trades for you and

1:16:37you know you're going to be sort of

1:16:38handsoff but as always

1:16:41>> machines run you know I think the thing

1:16:43is again The assumption here is that the

1:16:47machine is always going to solve

1:16:48problems. No, they're just going to

1:16:49amplify. They're going to make the the

1:16:52the the dirty work easy, but the hard

1:16:55work is still going to have to be

1:16:56analytic. You know, like machines are

1:16:57just never going to like everybody else,

1:16:59they're going to have to adopt and and

1:17:00adapt. So, I don't think like, you know,

1:17:02you running a thousand agents is going

1:17:03to make you a million dollars without

1:17:05any effort. It's most likely the agents

1:17:06are going to destroy half your accounts

1:17:08because because their agents, they don't

1:17:10care. They're not, you know, they're not

1:17:11emotional. They're like the the algo

1:17:13says buy and it's the seventh losing

1:17:15trade in a row. They're still going to

1:17:16go and eighth rate because the al the

1:17:17you know there's complete alpha decay in

1:17:19this thing but the agent doesn't um

1:17:20doesn't understand it. So I think you

1:17:23know I've done a huge amount of

1:17:25automated trading and it's been ex it's

1:17:29it's never been as it it it never is as

1:17:32good as the back test, right? It's it's

1:17:34always different. The the automation

1:17:36just always kind of goes off the rails.

1:17:38But it doesn't mean that AI itself isn't

1:17:40going to be incredibly powerful. I think

1:17:41it's going to it's going to put

1:17:42creativity in the greatest thing about

1:17:45AI is it allows all of this creativity

1:17:48to be actualized

1:17:50through just conversation right like

1:17:52regular people without you having to

1:17:54know massive amount of Python syntax or

1:17:56pine script syntax or any kind of you

1:17:59know uh arcane uh aspects of coding or

1:18:04database structures or anything else um

1:18:07to be able to create some new novel

1:18:09approaches and I think That's going to

1:18:11be super super fast. I mean, we're I'm

1:18:13working now on the ability of where AI

1:18:16has created tools that will let people

1:18:18like they press a button and it will

1:18:20just actually create a um uh a VWAP

1:18:24indicator for you or an ICT indicator

1:18:25for you or any kind of or you know a

1:18:27Ballinger band base indicator and then

1:18:28you can modify that yourself. So, you

1:18:30don't have to even learn the prompts. it

1:18:32will just it will create a perfect like

1:18:34it's it's actually kind of hard to make

1:18:35a perfect prompt from you know press

1:18:38button but we've gotten it to there and

1:18:40it's really and that's that's putting

1:18:42more power in people's in people's hands

1:18:44if it's putting more power in in traders

1:18:45hands because thousand traders have lots

1:18:47of creative ideas but they've never had

1:18:48the power to test them or to put them

1:18:51into play or to actually create

1:18:52indicators off of them you know um and

1:18:54so I think that's going to give people

1:18:56lots lots more

1:18:57>> I agree I think it's hard for to be

1:18:59totally algorithmic and and hands off.

1:19:02But I think it could help as tools and

1:19:04support with your tracking, journaling,

1:19:06testing, all these things.

1:19:06>> Exactly.

1:19:07>> But I also wonder why why does it seem

1:19:09big institutions are using a lot of

1:19:11quants and algorithmic trading and and

1:19:14little human involvement, but then on

1:19:16the retail crowd, no one really I mean

1:19:17all you see is these trading algorithms

1:19:19that are basically scams on the retail

1:19:21side. Is is that gap going to be closed

1:19:23by AI or is it something totally

1:19:24different?

1:19:24>> I think it will be. Yeah. I because um a

1:19:27lot of a lot of the the AI has all that

1:19:29quantitative knowledge. It has the best

1:19:31practices. you you know you've seen like

1:19:33you know AI has improved so much just

1:19:35even the basic like power make me a

1:19:37powerpoint make me a website you know

1:19:39yes you know it's not perfect but it is

1:19:41really like

1:19:42>> it's getting scary it's much much better

1:19:44than you know or just legal advice you

1:19:46know like anything medical advice I know

1:19:48people people go oh I can't believe you

1:19:49trust I'm like AI has been more accurate

1:19:51than my doctor has been in in half the

1:19:53things it's it's the knowledge of the

1:19:55world it's best practices of the world

1:19:57it constantly learns from best practices

1:19:59so it it definitely is I think going to

1:20:01be very useful Yeah. Um, you know,

1:20:03ultimately though, I mean, the market is

1:20:05already 90% machines, right? The market

1:20:08like 90% of all of all flow is Citadel

1:20:10and um, and Vert 2 just handling trades.

1:20:13But it doesn't mean that 90% of price

1:20:16action is like machines may drive the

1:20:19execution, but it's still human beings

1:20:21that still drive the direction, I think.

1:20:23And I think that's never going to

1:20:24change. Um, you know, because first of

1:20:26all, human beings program those

1:20:28machines. So those machines are kind of

1:20:29expressing the human being's uh opinion,

1:20:32right? And that expression of opinion

1:20:35just because it's codified doesn't mean

1:20:36it's always correct. It's, you know,

1:20:38it's it's maybe running on stale data.

1:20:40Now the data completely, you know, goes

1:20:41the other way around. So I think there's

1:20:43always going to be an opportunity.

1:20:46There's always going to be risk in the

1:20:47market and that means there's always

1:20:49going to be opportunity for speculation.

1:20:51to bring the conversation full circle

1:20:52from where we started which was how the

1:20:55markets was in the 80s and it was not

1:20:56digital and it was insider trading and

1:20:58you know completely different and now to

1:21:00how it is but also projecting forward

1:21:03>> the the the message I'm seeing is as

1:21:05more participants come in as more ideas

1:21:08and creativity and liquidity comes in

1:21:10the market gets more efficient yes and

1:21:12therefore when the when the market

1:21:14swings towards efficiency I'm I'm

1:21:16implying here and extrapolating the

1:21:17power of AI then to find alpha becomes

1:21:21incrementally more difficult and you get

1:21:23diminishing returns and therefore there

1:21:25is not the same incentive to participate

1:21:27and therefore less people participate

1:21:29and then alpha appears and it becomes

1:21:31like a pendulum. This is how

1:21:32historically the markets have been. But

1:21:33when there is uh the marginal effort is

1:21:36taken care of by AI, there's this idea

1:21:38floating around of perfectly efficient

1:21:40markets empowered by AI. Are we headed

1:21:42there? What's your thoughts on that?

1:21:44[sighs]

1:21:44>> Uh

1:21:47the only

1:21:49I suppose you could like in some some

1:21:51way make that argument. Um and I could

1:21:54see it, you know, eventually maybe going

1:21:56that way. But the human desire to

1:21:58gamble, the human desire to speculate is

1:22:01just always so strong. Think about this.

1:22:03What's the common what's the best advice

1:22:05anybody can give you from an investment

1:22:06point of view? You buy an index fund,

1:22:09you you place your money, you know, once

1:22:11and you really is the best advice. I

1:22:13mean, you know, like it's by far beats

1:22:14everything, right? But I was thinking

1:22:16about it. If everybody followed that

1:22:18advice, like if everybody just bought

1:22:20once a year, we wouldn't have a market,

1:22:23right? We wouldn't have we wouldn't have

1:22:24a market. There'd be no liquidity. who

1:22:26you know like if every if if if we just

1:22:28transacted once a year there'd be no

1:22:30liquidity. there'd be no instantaneous

1:22:32movement back and forth and the very

1:22:34fact that lots of people have different

1:22:36reasons for why sometimes you know it's

1:22:38not even speculation sometimes it's you

1:22:39know like you said liquid they need to

1:22:41just simply get liquidity or um you know

1:22:43or they are investing uh cycllically or

1:22:46whatever the point being is I think all

1:22:49as long as the world gets more complex

1:22:53hopefully we will have more risk and

1:22:55that will create opportunities

1:22:57>> I I like the way you put it in fact the

1:22:59guest just yesterday put it I have the

1:23:01Bellagio in my pocket. Yeah, the human

1:23:03desire to always speculate and have a

1:23:05bit of dopamine through the markets is

1:23:07always going to be there.

1:23:08>> You know, it's it goes back to the whole

1:23:09idea of like is AI going to completely

1:23:11replace all of us and I don't think so.

1:23:13The more the more you work with it, you

1:23:14realize I mean the human design the

1:23:17wants and needs are infinite and so

1:23:19we're always going to create new

1:23:20opportunities for hopefully human beings

1:23:22to to thrive.

1:23:23>> Uh to wrap up any lasting comments,

1:23:26thoughts or advice for a viewer sitting

1:23:27at home? Well, so you know, I think

1:23:29first of all, don't take anything too

1:23:31seriously, right? Um, things go bad,

1:23:34things go good. You you kind of have to

1:23:36just be even keel. It that's the hardest

1:23:38thing in the markets is to not, you

1:23:41know, be suicidal one day and and just

1:23:43completely uh uh manic manic the next

1:23:46day because everything is going Yeah,

1:23:48things are going to uh definitely eb and

1:23:50flow. But the other thing is to never

1:23:52ever think that you've found it. you

1:23:56found it for the next couple of months.

1:23:58Enjoy it, right? Enjoy it. Have a great

1:24:01time. Milk it for all it's worth. Make

1:24:03sure you keep it. That's the hardest

1:24:05part. Make sure you keep it and um

1:24:07always know that the it is going to

1:24:10somehow disappear. There's always

1:24:11markets are always going to change. Um

1:24:13and just be prepared for that if you're

1:24:14in that mindset of like you know the

1:24:15only constant is change. I think that's

1:24:17really the thing that people for human

1:24:21perspective we we hate change, right?

1:24:22But if you the great thing about being a

1:24:24trader is that you kind of get really

1:24:26used to lots and absorbing lots and lots

1:24:28of change and responding to change

1:24:30quickly. Like that's the other great

1:24:32thing about trading is it really teaches

1:24:34your mind to be much more flexible to

1:24:37anything and everything in the world. Be

1:24:39open be open to any ideas because you

1:24:42you know any ideas can happen. So that's

1:24:44the thing that I think is people

1:24:46misunderstand about the markets. This is

1:24:47one of the greatest things about them.

1:24:48>> There you go.

1:24:49>> Yeah. This was a very stimulating

1:24:50conversation, philosophical and a bit of

1:24:52conspiracies in there and cool stories

1:24:54at the beginning. So Boris, thank you

1:24:55for joining us today.

1:24:55>> Thank you so much. What a great joy to

1:24:57be here.

1:24:58>> Thank you.

1:24:58>> Brilliant. Brilliant. Nice work, man.

1:25:00Nice work.